A lot of people have actually asked me this question. They wonder what FX is, but it is actually very simple. It is just another name for forex or foreign exchange. Foreign exchange is the trading of one particular currency for another currency. For example, you trade the currency of the United States of America for the currency of the United Kingdom; USD to GBP. It is very simple. All of the foreign exchange transactions take place in a place called the foreign exchange market, which is also called the forex market. The forex market happens to be one of the most liquid places in the world, because it transacts trillions of dollars every single day.
It was reported that transactions go up to $6.5 trillion per day. That would mean that $6.5 trillion of liquid cash is being transacted every 24 hours.
The forex market is a very interesting place. This place is open 24 hours, for five days in a week. It is closed two days in a week. It also does not have a centralised location, but, it is an electronic network of banks, institutions, brokers, traders and individuals. There are forex market traders all around the world, millions of them.
Most of the money that we can consider is actually traded by casinos, banks and other financial institutions that have huge dealings every single day.
The foreign exchange market actually comprises of some of the largest security markets in the world when it comes to nominal value because of the immense number of transactions that happen on a daily basis.
I am sure that it would interest you to know that foreign exchange trading makes use of currency pairs. It is basically understood as one versus the other. For example, one USD is equal to 74 INR.
The market also does a fantastic job at determining the value, which is also known as ‘exchange rate’. This particular exchange rate changes every single day. Foreign exchange is actually very simple, because it is basically the changing of one currency to another. Whenever you travel abroad, you will be exchanging your currency to the currency of the country you are travelling to. I am sure you have done this in a foreign exchange kiosk in the airport, a kiosk that most international airports have.
Let me tell you a little bit about the size of the foreign exchange market. This particular market is incredibly unique for so many reasons; one of the reasons is clearly its size. The trading volume in the forex market is immense. When a market trades upwards of $6 trillion a day, we can assume its size accurately.
It would also interest you to know that the largest trading centres in the world are London, Singapore, New York and Tokyo.